Who drives the AI Revolution? Leaders laying the foundation for technological progress

At the core of this progress are companies working within AI's infrastructure—Nvidia, ASML, and Lam Research. Without their contributions, many of the modern technological achievements—from smartphones and AI chips to electric vehicles and smart appliances—would remain out of reach.

These companies provide the essential equipment and technologies required for developing and supporting the complex computing that defines AI. As a result, they establish significant barriers to competition. Their unique market positions make them appealing to investors focused on long-term investments in high-tech sectors.

Nvidia: from graphics to AI

Most market participants have heard of Nvidia, a company that has dominated the stock market since ChatGPT's release in late 2022. Nvidia's stock surged over 1,000% from its lows in October 2022, greatly enriching both investors and employees, and setting a new standard of success in the tech world.

Today, Nvidia’s market capitalization stands at approximately $3.43 trillion, positioning it as one of the world’s most valuable companies.

Despite high valuation multiples, some may view Nvidia's rapid stock price increase as a market bubble or mere early-investor fortune. However, Nvidia’s journey from a graphics-focused company to a central player in the AI revolution is a story of foresight, strategic innovation, persistence, and a steadfast vision. Its success is the result of many consecutive steps taken over the past two decades.

Founded in 1993 by Jensen Huang and his colleagues, Nvidia initially focused on developing graphics processing units (GPUs) for gaming and high-performance computing. These processors were designed for parallel data processing, essential for high-quality graphics. However, Nvidia quickly recognized that its GPU technology held potential for other fields, particularly the emerging field of artificial intelligence (AI).

In the early 2000s, Nvidia observed that its GPUs could accelerate AI computations. This insight led Nvidia to launch the CUDA (Compute Unified Device Architecture) platform in 2006, allowing developers to effectively program GPUs for general-purpose tasks. CUDA became a standard, opening access to Nvidia’s hardware for building deep learning models.

The significance of CUDA is hard to overstate. Nvidia invested substantial resources to make CUDA compatible with popular programming languages, such as Python, and to integrate it with leading AI frameworks, including TensorFlow and PyTorch.

By 2015-2016, when demand for deep learning surged, these frameworks had begun supporting CUDA as the preferred backend, optimizing core AI tasks on Nvidia’s GPUs. Thanks to this deep integration, CUDA became a crucial tool for AI developers, creating a "lock-in" effect within Nvidia’s ecosystem and raising barriers to entry for competitors.

Although competing platforms, such as AMD’s ROCm, also support deep learning frameworks, they have not achieved wide adoption, primarily due to lower performance, which reduces incentives to develop additional cores and further optimize. Open platforms, such as OpenCL, promised cross-platform compatibility for different hardware but also struggled with performance issues compared to CUDA.

In 2019, Nvidia acquired Mellanox Technologies, a company specializing in high-performance networking solutions—an acquisition that surprised some industry observers, as networking seemed unrelated to Nvidia’s core GPU business. However, this acquisition proved strategically significant. As AI workloads grew, the need for fast data transmission between GPUs became critical. Mellanox’s technology enabled Nvidia to create a network architecture where multiple GPUs could operate as a single, powerful computational unit. This step became essential for developing large AI models that require vast computing power and data bandwidth.

Is Nvidia a good investment?

Today, Nvidia is an undisputed leader in AI technology, with shares attracting investors from around the world. However, whether to invest in Nvidia at its record-breaking valuation remains an open question. Still, Nvidia is not the only player in AI and semiconductors with substantial growth potential. Other companies also stand to benefit from the anticipated technology revolution.

While not as widely known as Nvidia, and although their shares have yet to show comparable growth, their technologies and strategic market positions make them attractive for long-term investments. Examples include ASML Holding N.V., the exclusive supplier of EUV lithography technology crucial for the semiconductor industry, and Lam Research Corporation, which provides equipment for producing high-performance microchips.

Building tomorrow’s tech: ASML's essential role in the semiconductor landscape

When discussing the world’s most significant companies, names like Apple, Amazon, Google, and Tesla often come to mind. However, the Dutch company ASML Holding N.V., though less visible to the general public, plays a crucial role in today’s technological landscape. ASML is the sole supplier of EUV (extreme ultraviolet lithography) systems—a unique technology essential for the production of the most advanced semiconductors. Industry leaders such as Taiwan Semiconductor Manufacturing Company (TSMC), Intel, and Samsung rely on ASML's equipment to create high-tech chips, used in artificial intelligence (AI) systems, data centers, and other high-performance computing devices.

Amid exponential progress in AI, 5G, and autonomous systems, ASML’s role has become an indispensable part of the semiconductor supply chain. As of November 2024, ASML’s market capitalization is approximately $265.98 billion, making it one of the most significant companies in the tech sector.

Modern microchip production is an extremely complex and costly process in which ASML Holding N.V. holds a unique position due to its unmatched technological excellence. Without ASML’s unique contributions, the AI industry and related high-tech sectors would likely not have reached their current level of advancement.

Beyond high-performance computing and AI, ASML’s influence extends to everyday devices and systems we use. Nearly every electronic device you use today contains chips made using ASML’s machines. Whether it’s your smartphone, laptop, or car, ASML’s technology has played a vital role in its creation.

ASML’s latest generation of machines, described by Bloomberg as weighing as much as two Airbus planes, can etch patterns as thin as 8 nanometers. For comparison, a sheet of paper is approximately 100,000 nanometers thick. According to ASML’s website, each machine contains around 100,000 individual components and requires a complex logistical operation for delivery, including 40 containers, three cargo planes, and 20 trucks.

The cost of this advanced equipment is significant for chip manufacturers, mainly due to the substantial research and development invested in ASML’s products. The company’s newest model, equipped with high-aperture EUV lithography, was first delivered to Intel’s facility in Hillsboro, Oregon, in December 2023, at a price of $380 million. This high price has raised questions among some customers about the profitability of such investments. For instance, TSMC Senior Vice President Kevin Zhang praised the machine's capabilities but also expressed concerns regarding its cost (Taipei Times).

Geopolitical challenges and export restrictions

Despite ASML being a Dutch company, it is subject to U.S. export restrictions due to the American-made components in its equipment. Sanctions introduced in 2019 restrict the export of advanced EUV systems to China, limiting ASML to selling less powerful DUV systems in that market. According to ASML ASML's data, sales to China have made up nearly 50% of the company’s revenue in the last two quarters, underscoring the critical importance of the Chinese market to ASML. However, projections for 2025 indicate that China’s revenue share may fall to 20% as tightened sanctions increasingly limit Chinese companies’ access to ASML’s equipment. These changes reflect ongoing efforts to restrict China’s access to advanced technologies, likely impacting ASML’s total sales volume.

Enabling High-Tech advancements: Lam Research's role in chip manufacturing

Lam Research Corporation is a leading American supplier of equipment for semiconductor manufacturing, founded in 1980 by David Lam. As of October 2024, the company’s market capitalization stands at approximately $101.49 billion, making it one of the largest players in the semiconductor industry.

The world of microchips is not limited to smartphones and computers; it underpins every cutting-edge technology, from artificial intelligence systems to 5G networks. In this realm, Lam Research operates behind the scenes, yet its contributions are invaluable. The company develops and produces equipment for essential semiconductor manufacturing processes, including etching, deposition, lithography, and cleaning. These technologies enable the creation of high-density, high-performance chips that serve as the foundation of modern devices and powerful data centers.

Core processes and technologies of Lam Research

Lam Research offers equipment for plasma etching, which enables the creation of transistors and intricate circuit patterns with high precision. Tools like the Kiyo® and Flex® series are in demand among semiconductor industry leaders, including TSMC, Intel, and Samsung, allowing for transistor production as small as 7 nanometers. This level of precision supports semiconductor companies in pushing the boundaries of Moore’s Law, increasing transistor density and improving chip performance.

In addition to etching, Lam Research provides equipment for photolithography and mask creation, essential for transferring complex circuit designs onto wafers. These photomasks enable the accurate formation of transistor patterns, which becomes increasingly challenging as component sizes shrink. Lam Research also offers advanced cleaning systems that remove microscopic contaminants and protect fragile wafer structures from defects—crucial for the reliability of final chips. Industry leaders such as Intel and TSMC rely on Lam's solutions to produce advanced chips used in smartphones, high-performance servers, and AI systems.

Lam Research’s technologies are essential for meeting the growing demand for powerful, energy-efficient chips. With increasing performance needs for fields like AI and 5G, Lam’s equipment enables companies to produce chips capable of processing vast amounts of data in real-time. Whether for AI systems or next-generation networks, Lam Research continues to support the fundamental technological advancements driving the world forward.

Investment analysis in an era of rapid technological progress requires a deep understanding of companies that are not only part of the market but are genuinely driving it forward. Nvidia, ASML, and Lam Research are examples of companies whose innovative technologies and unique positions contribute significantly to the development of artificial intelligence, computing systems, and the semiconductor industry as a whole. Analyzing such leaders provides investors with insights into which technologies have true long-term potential and underscores the importance of identifying companies at the heart of industry transformation